Portland helped make Groupon a giant. Here’s how local businesses get crushed.

But the experience of another pedicab company shows one potential downside of these daily deals: wasted energy.

Portland Rose Pedals
Pedicab owner Casey Martell was disappointed with the performance of his
recent Google Offer for his brewery tour.

“They led me to
believe I was going to sell, like, hundreds of these things. But they
only ran it for a day. I only sold 26 out of the 700,” Martell says.
“It’s totally not worth our time.”

There were
consequences beyond Martell’s bottom line. “I brought on a few more
[drivers] because of this, and they’re still waiting to get some work,
because there isn’t any.”

Pistils
Nursery on North Mississippi Avenue is a popular spot for people
seeking to buy seeds, plants and chicken feed. Its Groupon deal last
year offered customers a 60 percent discount.

The deal was limited
to one voucher per customer. But it had a loophole: Customers could buy
unlimited vouchers if they said they were gifts.

“It was effing
ridiculous,” says owner Megan Twilegar. “I think we barely broke even on
the money side. We were slammed. We were wiped out.”

Some lose more than
time. One Portland business was among the first to go public with its
horror story about losing big money on its Groupon deal.

Jessie Burke, who is
the same age as Groupon CEO Andrew Mason, opened Posies Bakery &
Cafe in North Portland’s Kenton neighborhood at around the same time
Mason launched Groupon in 2009.

LESSON LEARNED: Posies Bakery & Cafe owner Jessie Burke was one of the first businesspeople in the country to go public with a Groupon horror story.

Credits: Darryl James

The cafe is pitched
at young mothers who aren’t keen on taking the tots to Stumptown.
(“Everyone loves you when you’re pregnant, but they hate you when you
have kids,” Burke says.)

Burke,
who has a graduate degree in public education from Portland State
University, got a $107,000 start-up loan from the Portland Development
Commission, where she once worked as an intern. Which means that local
taxpayers are invested in the success of Posies.

Burke
approached Groupon after hearing about the company from a friend.
According to Burke, Groupon divisional sales manager John Waller told
her that Groupon would keep 100 percent of the sales proceeds because
Posies’ average sales were under $10. Burke says she declined.

Groupon officials
later denied that this was the offer they made Burke.
BusinessInsider.com, which wrote about Posies last fall, quoted Groupon
CEO Mason as saying this aspect of Burke’s account was “100% false.”

But an email Burke provided to WW
seems to contradict that statement. It shows the company’s salesman,
Waller, coming back to Burke and offering her company a cut of the
money.

“I gave this some
more thought,” Waller writes. “Understanding that your business [is]
newer, I decided to split the revenue with you. So, you’ll be getting $3
of the $6 we charge the customers. Also, we incur a standard credit
card processing fee of 2.5%.... This should make this campaign even
better for your business!”

The deal offered $13 worth of food and beverages at Posies for just $6.

Within a day, 890 people bought vouchers.

“They came out of
nowhere,” Burke says. “And because they hold a coupon in their hand,
they feel like they’re entitled to something. It literally felt like I
was getting beat up.”

Burke
says she lost $10,000 on the deal. And it got worse. Groupon
customers—after jamming her shop—then went online and trashed her young
business.

At the suggestion of a
customer, Burke wrote a blog post calling Groupon the single worst
business decision she’d ever made. At the time, Groupon was, as Burke
put it, “the darling of the social media world,” so the sour note got a
lot of attention.

Groupon CEO Mason
left a conciliatory comment on Burke’s blog, and emailed her with both
an apology and suggestion that her cafe was an outlier.

“We’ve run deals for
hundreds of businesses similar to yours and they’ve had great
experiences, so I’m eager to understand what it is about your business
that made Groupon such a bust,” Mason wrote.

Burke was left cold.

“It’s hard enough to
go into business and take a huge risk and put your life on the line,”
Burke says. “Groupon is going to be like locusts. They’re going to go
through these businesses, they’re going to close all of these
businesses, and they’re going to make billions of dollars and sell the
company and run.”

"In the low usage areas, we found that our vehicles sit idle four times longer, ultimately affecting overall vehicle availability for the Portland membership base, as well as parking for the Portland community."

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